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# Calculating Real Returns and Risk Premiums You've observed the following returns on Crash-n-Burn Computer's stock over the past five years:

3.Calculating Real Returns and Risk Premiums

You've observed the following returns on Crash-n-Burn Computer's stock over the past five years: 7 percent, -12 percent, 11 percent, 38 percent, and 14 percent.

Required:

a.

The arithmetic average return on Crash-n-Burn's stock over this five year period was 11.6 percent.

b.

Suppose the average inflation rate over this time period was 3.5 percent and the average T-bill rate over the period was 4.2 percent. The average real return on Crash-n-Burn's stock was ____percent and the average nominal risk premium on Crash-n-Burn's stock was ____percent. (Do not include the percent signs (%). Round your answers to 2 decimal places. (e.g., 32.16))

3.Calculating Real Returns and Risk Premiums You've observed the following returns on Crash­n­Burn Computer's stock over the past five years: 7 percent, ­12 percent, 11 percent, 38 percent, and...

## This question was asked on Oct 24, 2010 and answered on Oct 25, 2010.

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